“Living inheritance” set to soar amid cost of living crisis

New research has revealed that a substantial number of advisers believe the cost of living crisis is likely to increase prevalence of the “living inheritance” with the number of clients seeking to give lump sum cash gifts to adult children set to soar.

Research among more than 200 adviser firms for the Just Group Care Report 2022 found that more than four in 10 (42%) thought the price-squeeze would increase the number of clients looking to give a living inheritance in the short term.

Only 24% thought the cost-of-living-crisis would decrease the number of their clients looking to give a living inheritance.

Nearly all advisers (91%) reported having clients who had gifted or were planning to gift cash while they were still alive rather than bequeathing it through their will after death. The main reasons for making the gifts were for a housing deposit, education fees, for weddings and to help with the current cost of living crisis.

However, two thirds of those advisers said they would need to challenge some clients wishes. The key reasons for challenging clients were because the gift could leave them short of income in later life (64%), because they don’t have enough to give away (52%), or because they had not considered care costs in later life (37%).

“Understandably, people want to help their children financially, but advisers have an important role managing their clients’ decisions to hand over cash if it could leave them short in the future,” said Stephen Lowe, group communications director at retirement specialist Just Group, adding:

“Our latest Care Report highlights the reluctance among many over-45s to plan for care and the important role advisers have in opening their eyes. It could lead to some difficult conversations because future care costs are what could be called a ‘known unknown’ that loom large but are currently impossible to quantify.”

He said that the funding reforms due to be implemented in England in October 2023 are a big step forward due with the £86,000 cap on care costs giving people something solid to work with:

“The introduction of the cap on personal care costs is a good opportunity for advisers to talk to clients about potential care needs and costs. It will be important for clients to know that the cap won’t be the limit of what they will be expected to pay because on top will be Daily Living Costs – food, utilities and accommodation in a care home – plus the cost of any extras.”

Just Group say 79% of over-45s have not thought about care, planned for it or spoken to family about it. 26% said the main reason was that they were too young to think about it, a similar number (24%) thought it was too depressing to think about, and one in five said either it costs too much to think about (11%) or the system is too confusing (9%).

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